No acquisition plans in China; positive on Europe ops: TCS

Out performing some of biggest names in IT, Tata Consultancy Services (TCS) has emerged as the poster boy in the country. N Chandrasekaran, CEO, TCS, has been credited for transforming TCS – India’s largest IT services company into an even bigger juggernaut.

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No acquisition plans in China; positive on Europe ops: TCS

Out performing some of biggest names in IT, Tata Consultancy Services (TCS) has emerged as the poster boy in the country. N Chandrasekaran, CEO, TCS, has been credited for transforming TCS – India’s largest IT services company into an even bigger juggernaut.

Out performing some of biggest names in IT, Tata Consultancy Services (TCS) has emerged as the poster boy in the country. N Chandrasekaran, CEO, TCS, has been credited for transforming TCS India's largest IT services company into an even bigger juggernaut. CNBC-TV18 chats exclusively with N Chandrasekaran to find out his success formula.

Below is the edited transcript of his interview to CNBC-TV18.

"All our initiatives are coming out of this paradigm," says N Chandrasekaran.

The 48-year old CEO recently won the stations Asia Business Leader Award admits that the turbulent business environment has made the job harder.

"There have been a large number of uncertainties; there have been issues with respect to economy, natural calamities, issues of different kinds, and coping with them is probably one of the biggest challenges," says N Chandrasekaran.

A company man for the past 25 years, Chandra has been known by its employees to streamline TCS into a sleek machine, restructuring this behemoth into 23 vertical-led units, improving decision making down the line and making each unit more accountable.

"In terms of number of people, TCS is a very large company, with about 2,50,000 professionals. I felt the need to have lot of agility. My view was that we can respond to the market better, be agile and grow if we have a mini organization setup with around 5,000 to 8,000 employees, a CEO, CFO and HR officers as a management team that can run the unit efficiently," says Chandrasekaran.

Chandrasekaran also chased new markets such as small and medium sized enterprises.

Chandrasekaran: But we quite didn’t know how to chase small and medium sized enterprises.

Q: Why was that?

Chandrasekaran: Because our company serves the Fortune 500, Fortune 1000 companies so all our customers are leaders in their respective industry. The deal sizes become very smaller when we go to small and medium business.

Q: You need to come up with different business models?

Chandrasekaran: Yes.

Q: Like what?

Chandrasekaran: There are some problems. Small and medium enterprise doesn't have money to invest - they don't like large capex, they cannot attract people and anyone who serves that market typically has a solution for large enterprises or kind of downsizes those solutions to offer it to small and medium businesses.

Considering all these factors we though if we can come up with the cloud model where we can have a standardised set of solutions for small and medium businesses on an operating cash flow basis then it would be attractive.

Under his leadership TCS' market value has doubled since 2009 and revenue jumped 24 percent in 2011 to USD 10 billion, outperforming its closest rival Wipro and Infosys .

Q: Despite global volatility, TCS has managed to post strong growth and earnings when there are question marks about technology spending coming from the US and Europe. How have you mitigated the headwinds, what are you doing right?

Chandrasekaran: The customer segment that we operate they are going through tough times, but at the same time they are investing in technology primarily due two reasons; first, they are revenue efficiencies and typically driving efficiency involves investing in technology to get better returns. Second, the rate of change in technology is dramatic.

Technologies like cloud paradigm, mobility and big data are fast evolving and it becomes extremely important for companies to re-imagine their businesses, processes in light of these technologies. So we are aligning ourselves with these two requirements and that’s throwing up a lot of opportunities and resulting in growth.

Q: Your rivals have expressed concerns about the outlook. Do you think you can continue to outperform the industry?

Chandrasekaran: I don't like to predict about our out performance but we will do that. The tax spending will continue, the overall pie of the tech industry is increasing. Second, what we do as a company within that market continues to expand because we are investing in new areas and investing innovation or creating new capabilities what we are able to do today is definitely different and these things are driving growth fast.

TCS stock price

On March 31, 2015, Tata Consultancy Services closed at Rs 2547.05, down Rs 10.2, or 0.4 percent. The 52-week high of the share was Rs 2834.00 and the 52-week low was Rs 2160.00.

The company's trailing 12-month (TTM) EPS was at Rs 104.29 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 24.42. The latest book value of the company is Rs 224.90 per share. At current value, the price-to-book value of the company is 11.33.